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As an executive in the long-standing casino sports books industry, I was surprised by the flooding of gaming media and my professional colleagues about the possibility of repealing the Professional and Amateur Sports Protection Act of 1992 (PASPA). It's now a common belief that the Supreme Court will vote in favor of legalizing sports betting in New Jersey.

Assuming that all states, including New Jersey, allow sports betting laws, we have to guess how each state and municipality will tax these new revenue streams. Currently, New Jersey's Gaming Accountability and Modernization Enhancement Act does not offer a proposed tax rate. Currently, however, New Jersey casinos pay a 9.25% tax on gross gaming revenue, while online casinos charge a 15% tax rate. I would have to assume that New Jersey pays a higher percentage of its sportsbook revenue. Nevada sportsbooks pay about 6% of their income as state taxes, and federal taxes pay 0.25% of their handling. Nevada is a favorable environment for business. In Nevada, illegal bookmakers are not a problem, because legal bookmakers provide competitively priced products, pay in a timely manner, and are subject to strict regulations. Nevertheless, the sportsbook industry is a very difficult area to succeed because of its low returns.

In addition, leagues, networks, and other leagues expect to benefit financially from legalizing sports betting. ESPN's Sports Betting Writer David Purdum warns that while these groups seem to acknowledge that they should participate in the revenue, all parties are reasonable. "Everyone needs to be willing to take a small piece of a giant pie." It's enough time for reality. Nevada's sports betting business can generate excitement and be a significant draw, but it makes a small contribution to the overall revenue success of Nevada casino operations. It's a fragile business. In the 12 months to October 2017, Nevada's sports gross revenue was $222.7 million, just under 2% of its slot and table game gross revenue. During this period, soccer revenues fell 41.6% and sports parlay cards (mainly football) fell 12.6%.

In addition, the sports betting business has risks lurking. There are days of losing, weeks, and months. During this period, sportsbooks only maintained 3.66% of their total bets. It's a low-margin business that requires vigilant risk management.

The theoretical retention rate for consecutive bets on sports is 4.55%. This means that for every $100 payment, sports books will earn about $4.55 on average. You will have to pay all the taxes and expenses from this income. Payability in sports determines this theoretical retention rate. In other words, for every $11 bet on a team, you get a potential win that will earn you $10. In a game, if two people bet $11 each on the other team, they will earn $22 and pay $21 to the winner. The revenue for sports books is 1/22 or 4.55%.

The 11/10 relationship is a fundamental business relationship in sports betting. In order to get a $10 return, you have to be willing to risk $11. The formula is used primarily in all legal and regulated sports books, and is perhaps more importantly a standard used by almost all illegal bookmakers.

New Jersey's sports bookmakers would switch from an 11/10 relationship to a 12/10 or even 13/10 betting odds because of the onerous tax and payment of "signboards" for any player seeking to qualify. The likely outcome of such a decision to change the betting odds would embolden illegal sports bookmakers to market their business in a more aggressive way, and offer consumers a better deal at the existing $11 rate. In this case, the black market would flourish, and casinos would flounder under the crushing weight of taxes and open palms.